Facebook, Inc. FB yesterday announced that it will broaden its ad offerings on Instagram in a bid to monetize the platform. The app will be opened to all advertisers by the end of the year. Earlier, the program was available to only a few select marketers.
The company is taking a three-pronged approach to develop ads including the expansion of ad offerings (with action-oriented formats), the enhancing of marketers’ targeting capabilities and the streamlining and simplifying of the ad-purchasing process.
Initially, the platform will be opened to marketers from Facebook and then gradually to other advertisers. Facebook is devising the strategy in a way that all kinds of businesses would be able to advertise on the platform by the end of this year. The company is also planning to design novel direct-response ad formats for all kinds of marketers. Going forward, the company will start testing such formats.
Instagram was acquired by Facebook in 2012 for $1 billion and since then has gained immense popularity. Advertising was introduced on Instagram in late 2013 and has been consistently gaining traction with increasing engagement levels. The company had stated in an earlier report that on an average, users in the U.S. spend as much as 20% of their mobile time on Facebook and Instagram. In fact, in Dec 2014, Instagram surpassed Twitter’s TWTR user base with more than 300 million active users. According to the Nielsen Brand Effect survey, Instagram is well-positioned in the online advertising market with ad recall from sponsored posts 2.9 times greater than standard.
We believe that the immense scope for monetization of Instagram and other Facebook platforms like WhatsApp and Oculus can be significant growth drivers in the long run, given their escalating user bases.
Also, it will strengthen this Zacks Rank #3 (Hold) company’s position amid stiff competition from the likes of Twitter, Microsoft Corp. MSFT and Google GOOGL.
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